Formative Experiences and Portfolio Choice: Evidence from the Finnish Great Depression

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  • BI Norwegian Business School


We trace the impact of formative experiences on portfolio choice. Plausibly exogenous variation in workers’ exposure to a depression allows us to identify the effects and a new estimation approach makes addressing wealth and income effects possible. We find that adversely affected workers are less likely to invest in risky assets. This result is robust to a number of control variables and it holds for individuals whose income, employment, and wealth were unaffected. The effects travel through social networks: individuals whose neighbors and family members experienced adverse circumstances also avoid risky investments.


Original languageEnglish
Pages (from-to)133-166
JournalJournal of Finance
Issue number1
Early online date2016
Publication statusPublished - Feb 2017
MoE publication typeA1 Journal article-refereed

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